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AUDITING PROBLEMSPRE-MIDTERM EXAMINATIONThe shareholders’ equity section of Cha-Cha Corporation’s balance sheet as ofDecember 31, 2021, is as follows:Ordinary share capital, P5 par value; authorized,2,000,000 shares; issued, 400,000 sharesP2,000,000Share premium850,000Retained earnings3,000,000The events occurred during 2021:Jan. 510,000 shares of authorized and unissued ordinary shares were soldfor P8 per share.Jan. 16Declared a cash dividend of 20 centavos per share, payableFebruary 15 to shareholders of record on February 5.Feb. 1020,000 shares of authorized and unissued ordinary shares were soldfor P12 per share.March 1A 30% stock dividend was declared and issued. Market value pershare is currently P15.April 1A two-for-one split was carried out. The par value of the shares wasto be reduced to P2.50 per share. Market value on March 31 wasP18 per share.July 1A 15% stock dividend was declared and issued. Market value iscurrently P10 per share.Aug. 1A cash dividend of 20 centavos per share was declared, payableSeptember 1 to shareholders of record on August 21.Based on the preceding information, determine the balances of the following atDecember 31, 2021.Number of ordinary shares issued and outstanding -1,285,700Ordinary share capital -P3,214,250Share Premium -P2,277,750Retained earnings -P338,860
July 1167,700419,2501,257,750(1,677,000)Aug. 1000(257,140)Ending Bal.1,285,700P3,214,250P2,277,750P338,860Ina Company purchased 250,000 ordinary shares of Keba Corporation on July 1,2021 at P16.50 per share, which reflected book value as of that date. At the time ofthe purchase, Keba had 1,000,000 ordinary shares outstanding. Ina had noownership interest in Keba prior to this purchase. Keba reported net income ofP840,000 for the six months ended June 30, 2021. Ina received a dividend ofP105,000 from Keba on August 1, 2021. Keba reported net income of P1,800,000 forthe year ended December 31, 2021, and again paid Ina Company dividends ofP105,000.

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1966, 1981, 1968, 1979, 1970

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